Saturday, December 15, 2012

BOJ's JGB holdings exceed ¥110 trillion; BOJ, Fed in a QE race

The Bank of Japan continues to build its holdings of Japanese government securities. The holdings crossed ¥110 trillion, now representing 23% of the nation's GDP. By comparison, the Fed's treasuries holdings represent 11% of the US GDP, while its total securities holdings (including MBS) is roughly 17.5%. Of course going forward we have a "race" between the two central banks.

Source: BOJ

The currency markets seem to indicate that the BOJ will ultimately win the race, as the yen continues to weaken. This is driven by three factors: